NZD/USD recovers to 0.6960 after dropping to 2021 lows
- NZD/USD stays in the negative territory in the American session.
- US Dollar Index struggles to hold above 92.50.
- CPI inflation data from US provided a boost to USD in early American session.
The NZD/USD pair came under strong bearish pressure in the early American session and dropped to its lowest level since November at 0.6917 before staging a rebound. As of writing, the pair was down 0.22% on the day at 0.6962.
CPI-driven DXY rally loses momentum
The USD's market valuation remains the primary driver of NZD/USD's movements on Tuesday. After the data from the US showed that the annual Consumer Price Index (CPI) jumped to 5.4% in June from 5% in May, the US Dollar Index (DXY) surged to a five-day high of 92.73.
Assessing the inflation report, "cash for clunkers – 10.5% more cash than one year ago, and that is the main driver behind accelerating US inflation," noted FXStreet analyst Yohay Elam. "Had prices of used cars remained unchanged, the headline Consumer Price Index would be roughly 3.6%, not 5.4% as reported. Core CPI would also be substantially lower than the 4.5% YoY reported for June."
US Inflation Quick Analysis: Dollar selling opportunity? Fed could shrug off clunker-driven CPI.
However, with risk flows returning to markets in the last hour, the greenback lost its strength and the DXY erased a large portion of its gains. Currently, the index is up 0.27% on the day at 92.47.
Reflecting the uıpbeat market mood, the S&P 500 Index, which opened in the negative territory, is up 0.1% on the day and the Nasdaq Composite is gaining 0.65%.
Technical levels to watch for